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Full text of "Firm's Image Restoration Strategies: Cases in Ethical Apologia in Corporate Crisis"

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in 2012 with funding from 

LYRASIS Members and Sloan Foundation 



http://archive.org/details/firmsimagerestorOOmcdo 



Firm's Image Restoration 
Strategies: Cases in Ethical 
Apologia in Corporate Crisis 

by 
Kristin D. McDonald 



A Thesis Submitted in Partial Fulfillment of Requirements of the CSU 

Honors Program for Honors in the degree of Bachelor's of Business 

Administration in Management, D. Abbott Turner College of Business and 

Computer Science, Columbus State University. 




Thesis Director 




Committee Member 



cy / < // ^— y 



Committee Member 



L/Vk.^)rti AkL~^A 



Honors Program Director 



Kristin McDonald 
1 200 Lee Road 345 
Salem, AL 36874 

November 24, 2009 

Dr. Tom Loughman 

D. Abbott Turner College of Business and Computer Science 

4225 University Avenue 

Columbus, GA 31907 

Dear Dr. Loughman: 

Enclosed is the completed thesis Corporate Crisis: Cases in Image Restoration 
Strategies and Ethical Apologia. This report was compiled using extensive secondary 
research from numerous sources. This research reveals pertinent information regarding 
ethical apologia and the image restoration strategies used by companies when involved 
in a crisis. 

The primary sections of this paper introduce the concepts of ethical apologia and 
image restoration strategies examined by Benoit, Ware, and Linkugel. The introductory 
sections also include information regarding the anatomy of a crisis and the stages of a 
crisis established by Gottschalk. Furthermore, examples of each image restoration 
strategy are presented in the cases researched. These cases include the Ford Pinto, 
the Exxon Valdez oil spill, a murder at McDonald's, the AT&T Network breakdown, the 
Gerber baby food glass contamination, the Union Carbide gas leak, the Tylenol 
poisonings, and the Calnev pipeline rupture. Each of these cases is described in depth 
and their reaction to each crisis is evaluated. 

I would like to thank you for your assistance in compiling this thesis and the time 
you invested in this procedure. I would also like to thank Dr. Danna Gibson, Dr. Tobias 
Huning, and Dr. Jong Ha for being a part of this process. Your opinions and advice have 
significantly assisted me in this process and are greatly appreciated. 

Sincerely, 



Kristin McDonald 



ii 



Table of Contents 



Item 



Pages 



Introduction 
Theoretical Background 



Stages of a Crisis 

Anatomy of a Crisis 

Justification for Image Restoration 

Image Restoration Strategies 

Apologia Theory 

Four Factors of Verbal Defense 

Ethics and Social Responsibility 



Cases of Image Restoration 



Ford Motor Company: The Pinto Case 

The Exxon Valdez Oil Spill 

Murder at McDonald's 

AT&T Network Breakdown 

Gerber: Baby Food Glass Contamination 

Union Carbide Gas Leak 

The Tylenol Poisonings 

Calnev Pipeline Rupture 

Summary of Findings 



1-13 

1-2 

2-3 

4 

4-7 

8-11 

11-13 

13-15 

15-41 

16-20 
20-24 
24-27 
28-31 
31-34 
34-38 
38-42 
42-46 
46-47 



Conclusion 
References 



47-48 
49-50 



in 



Executive Summary 

This paper examines ethical behavior in organizations and the decisions made 
when faced with a crisis. The research looks at the anatomy of a crisis and the stages of 
a crisis (Gottschalk, 1993). The image restoration strategies are also included, along 
with the justification for image restoration in organizations. The five image restoration 
strategies are denial, evading responsibility, reducing the offensiveness, corrective 
action, and mortification (Benoit, 1995). Ethical apologia theory is described in the paper 
as well as the four factors of verbal defense (Ware and Linkugel, 1973). These four 
factors are denial, differentiation, bolstering, and transcendence. The paper also studies 
eight cases of image restoration and the actions taken by companies faced with a crisis. 
The companies researched are Ford, Johnson & Johnson, Exxon, McDonald's, AT&T, 
Union Carbide, Gerber, and Kinder Morgan. Each case is studied in depth and the 
image restoration strategy used by each is examined and judged for its success in 
correcting the problem. 

The research conducted provides a key insight into the successfulness of image 
restoration strategies. It also presents the actions that take place when a company is 
involved in a crisis. The research methodology used for this paper involves an 
examination of eight cases of crisis and analyses of the impact of each crisis on the 
company. Overall, this paper supplies information regarding what occurs during a crisis, 
a correct way to respond to a crisis, and real-life examples of the right and wrong 
responses by well-known organizations. 



IV 



Firm's Image Restoration Strategies: 
Cases in Ethical Apologia in Corporate Crisis 

Introduction 

Ethical behavior in the workplace occurs when managers follow ethics, a set of 
moral principles or values that define right and wrong. Corporations have a social 
responsibility to the public and must insure the safety of their products and services. 
In order to take actions and pursue policies that benefit society, companies must 
sometimes put the greater good of society above the economic goals of their 
company. Unfortunately, in certain situations, the safety and general health of the 
public is put at risk in order to increase the profits of the company. The choices that 
companies make when faced with a crisis can determine and influence the success 
and reputation they receive from people around the world. The actions of eight 
prominent companies provide an insight into the effect each ethical decision had on 
the performance of the business. Even though the situations faced by each company 
were very different, the overall effect and decisions made have affected their 
performance throughout the years. A major concept to be drawn from these cases is 
that image restoration is essential to the success or failure of a company, and each 
company has a social responsibility to remain trustworthy, fair, and moral in their 
actions. 

Theoretical Background 
Stages of a Crisis 

When a company is faced with a crisis, there are three stages it goes through, 
according to Jack Gottschalk, author of Crisis Response (1993). The first stage is the 
pre-crisis stage which is composed of the warning signs of a problem. Throughout 



Firm's Image Restoration Strategies: 
Cases in Ethical Apologia in Corporate Crisis 

this stage, the company should attempt to resolve the problem before it intensifies. If 
the proper steps are not taken, the next phase is the actual point of the crisis. This 
area consists of the climax of the problem and is the stage where the company 
should assess the crisis and take action. The final stage is post crisis where the 
company must focus on rebuilding and reforming the problem areas. In order to fully 
recover from the crisis, the organization must strive to keep all stakeholders 
informed, including management, employees, media, government, and the 
consumers. If the situation is left unaddressed, it can seriously jeopardize the ability 
of the organization to conduct normal business activities. 

Anatomy of a Crisis 

According to Gottschalk, there are three main components when responding 
to a crisis that make up the anatomy of a crisis (1993). The first step to being fully 
effective when responding to a crisis is to have a crisis team prepared to make 
decisions quickly and decisively and to act on their decisions. An organization that is 
prepared and has an established crisis response team will be more capable of 
making the correct decision and doing so in a timely manner. A crisis team 
specializes in the steps to be taken when faced with a problem and can effectively 
help an organization in their time of need. Crisis team members must remain calm 
and level headed when asked for a solution, as well as being up to date on the 
current ethical dilemmas faced by companies throughout the world and the way 
others respond to crises. By remaining up to date, the organization can ensure that 



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Firm's Image Restoration Strategies: 
Cases in Ethical Apologia in Corporate Crisis 

the process used when attempting to put the crisis behind them is the most efficient 
and least damaging to the company's reputation. 

Furthermore, Gottschalk suggests that the second step in responding to a 
crisis is to anticipate what will happen next and take control of the situation. This 
helps a company by providing them with an insight into the problem and allowing 
them to be prepared for whatever may occur in the immediate future after a crisis. A 
proactive company is more effective in addressing a crisis than a reactive one, 
because reactive companies are prolonging the overall effects of the issue. In order 
to become more proactive, an organization must assess what social responsibilities 
are expected from them and examine how they can achieve these expectations more 
successfully. The best way to avoid a crisis is to attempt to keep a problem from 
arising in the organization or in its surrounding environment. Furthermore, the crisis 
team and organization must try to anticipate any needs of their consumers or 
problems that could arise and be knowledgeable on how to solve these issues once 
they occur. 

The final step in responding to a crisis, based on Gottschalk's research, is 
encouraging the crisis team members to maintain a sense of objectivity and 
perspective. Therefore, the crisis team is able to produce a valuable response to the 
crisis that is not emotionally charged. This allows the organization to look at the 
public's opinion and viewpoint regarding the crisis and helps to rebuild the company's 
reputation by showing they value the opinion of their customers. Even though the 
belief systems of people may be different, by examining the attitudes of several 
different people the crisis team will be able to make a more educated and profitable 



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Firm's Image Restoration Strategies: 
Cases in Ethical Apologia in Corporate Crisis 

decision. If an organization chooses crisis team members who are responsible and 
subjective, responds in a timely, truthful manner, and addresses all the necessary 
steps in the anatomy of a crisis, their reputation and the overall success of their 
business should not be adversely affected for the future. 

Justification for Image Restoration 

William Benoit, author of Accounts, Excuses, and Apologies: A Theory of 
Image Restoration Strategies, examines four reasons for image restoration in an 
organization (1995). The four reasons for image restoration address the various 
possibilities regarding why an organization can fall into a crisis situation. The first 
reason involves the various limited resources available in our world and the need for 
humans to compete for these resources. The second reason addresses 
circumstances out of our control that can limit the organization's ability to meet its 
obligations. The third reason is that human beings are not perfect and make 
mistakes, while some are guided by their own self-interests. Many of the cases 
researched in this paper are driven by the wants and needs of the organization, 
rather than the safety of the product. The final reason given by Benoit for image 
restoration deals with the conflict between people who possess competing goals. 
There are many different motives companies possess when attempting to restore 
their image, as well as the strategies they use in image restoration. 



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Firm's Image Restoration Strategies: 
Cases in Ethical Apologia in Corporate Crisis 

Image Restoration Strategies 

There are five broad categories of image restoration established by Benoit in 
his research (Accounts, excuses and apologies, 1995). These strategies are denial, 
evading responsibility, reducing offensiveness, corrective action, and mortification. 
There are several different moments where a corporation may attempt to deny the 
events of a crisis. The two main examples of denial are denying that the offensive act 
ever occurred or denying any involvement the corporation may have in the situation. 
When attempting to use denial as a defense in a court of law, many corporations and 
individuals attempt to use an alibi, or someone who can testify that the person 
charged was somewhere else at the time and could not have committed the crime. 
However, it is difficult for an organization to establish an alibi when a crisis clearly 
pertains to their product or judgment. Furthermore, if a corporation attempts to deny a 
crisis, this causes people to question whose responsibility the crisis really was. 
Therefore, denial is the least favored image restoration strategy because it causes 
the public to perceive the company as uncaring and indifferent. 

According to Benoit (1995), evading responsibility occurs when a company 
attempts to reduce their visible responsibility for the crisis. There are four different 
strategies formulated by Benoit that a corporation can choose to use when 
attempting to evade responsibility. The first strategy, scapegoating, occurs when a 
company claims that the wrongful act was committed only in response to another 
wrongful act which provoked the organization. The second strategy, defeasibility, 
occurs when a company declares that there was a lack of information about or 
control over certain important factors regarding the situation. This strategy allows the 

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Firm's Image Restoration Strategies: 
Cases in Ethical Apologia in Corporate Crisis 

company to reduce their amount of responsibility by claiming that they did not have 
sufficient information to make an educated decision. The third strategy that can help 
a company evade responsibility occurs when a company attempts to make an excuse 
for the accident or problem. The final strategy takes place when a company tries to 
justify the performance of the action on the basis of what they claim is worthy motives 
or intentions. Therefore, the company asks the public not to hold them completely 
responsible for the crisis because the action was done with good intentions. 

Reducing the offensiveness of the action attempts to decrease the animosity 
experienced by the public, according to Benoit (1995). There are six alternatives that 
can be used when attempting to reduce the offensiveness of the crisis. These 
alternatives are bolstering, minimization, differentiation, transcendence, attacking the 
accuser, and compensation. Benoit states that bolstering occurs when a company 
tries to relate positive attributes to the problem in order to offset any negative effects 
(1995). Minimization simply seeks to minimize the negative effect associated with the 
offensive act, while differentiation tries to distinguish the problem from any other 
similar but unfavorable actions. Transcendence occurs when a company tries to 
place the act or problem in a different context, usually a broader context in order to 
suggest a different situation (Benoit, 1995). Companies sometimes try to attack the 
accuser in order to reduce the offensiveness, in the hope that the damage to the 
accuser's image can cause his or her accusations to be forgotten. Compensation is 
the final form of reducing offensiveness and is used most often. Compensation 
occurs when a company seeks to reimburse a victim in order to offset any negative 
reactions they may have to the wrongful act. Reducing the offensiveness of the 



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Firm's Image Restoration Strategies: 
Cases in Ethical Apologia in Corporate Crisis 

wrongful act is normally positively accepted by the public because the company is not 
denying their involvement in the act or trying to diminish the severity of the crisis 
(Benoit, 1995). 

In Benoit's view, corrective action occurs when a company or organization 
gives their word to correct the problem, crisis, or wrongful act {Accounts, excuses 
and apologies, 1995). The company attempts to restore their reputation and the 
standing of their company to the way it was prior to the wrongful act or crisis. They 
also vow to remain honorable and make the necessary changes to prevent the 
situation from occurring again in the future. Furthermore, corrective action allows a 
company to determine the root cause of the problem and fix it so that it will not occur 
again and cannot damage the reputation of the organization. This method essentially 
serves as an apology and allows the company to accept responsibility for their 
mistakes while attempting to re-establish the upstanding reputation they held prior to 
the crisis (Benoit, 1995). 

The final image restoration strategy established by Benoit is mortification 
(1 995). Mortification occurs when an organization accepts full responsibility for the 
wrongful act and asks forgiveness from their consumers as well as the public. The 
public then can either believe the apology is sincere and forgive the organization, or 
can reject the apology and refuse to continue doing business with the company. The 
majority of people will forgive an organization for their wrongdoing if the apology 
seems sincere and they show that they care for the well being of their consumers. 
Another aspect of mortification is accepting responsibility for the action and 
expressing regret for the crisis occurring. Benoit also states that it is wise for an 



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Firm's Image Restoration Strategies: 
Cases in Ethical Apologia in Corporate Crisis 

organization to pair mortification with corrective action and apologize for the problem 
while attempting to correct it (1995). Overall, mortification and corrective action are 
the best options a company can use when attempting to restore their image. 

Ware and Li nku gel's Apologia Theory 

Ware and Linkugel are two prominent professors who researched apologia, 
the speech of defense. Historically, the study of apologia has been concerned with 
individuals accused of wrongdoing who seek to clear their names (They spoke in 
defense of themselves, 1973). Apologia is referred to as the speech of defense and 
is used by a corporation when presented with a crisis to help it respond to criticism by 
offering a defense or response to the problem. The response typically has an ethical 
portion that addresses the public criticism. The apologies offered by a corporation 
acknowledge guilt and portray the accused corporation as defenseless and 
vulnerable to the situation. However, in the public eye, because corporations and 
organizations are incapable of emotion and feeling, these ideas must be portrayed by 
the individuals who represent or run the company. There are certain aspects, 
thoroughly researched by Ware and Linkugel, which must be possessed by an 
apology in order to be considered effective (1973). 

In order for an apology to be efficacious, it must be truthful, sincere, timely, 
voluntary, address all stakeholders, and be performed in the appropriate context 
according to Ware & Linkugel (1973). An apologia that is truthful includes all useful 
information that is pertinent to the situation. A corporation must make sure they do 
not omit key facts that would alter the public's opinion, and they should not engage in 

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Firm's Image Restoration Strategies: 
Cases in Ethical Apologia in Corporate Crisis 

deception or lie about any events that occurred. Truthfulness is one of the most 
respected qualities that can be possessed by a corporation. If the public feels that 
they are being betrayed or lied to, they will not respect the corporation and will refuse 
to buy the products or services offered by the company. 

A sincere apology is required in order to regain the respect and support of the 
public as well (Ware and Linkugel, 1973). The company must attempt to demonstrate 
that they are putting an effort into regaining the appreciation and credit of consumers. 
Sincerity can be achieved using the communication and operational portions of an 
organization. The company must show a desire to reconcile with the stakeholders 
and consumers for genuine reasons besides avoiding the unwanted attention from 
the media and public (Ware and Linkugel, 1973). If the public believes that the only 
reason a company is trying to reconcile is due to unwanted attention, they will not put 
trust or faith into the success of the company and the safety of their product. People 
must feel that the corporation they are supporting attempts to ensure the safety of 
their customers as well as cares about the well being of their consumers. 

The third aspect of an ethical apologia according to Ware & Linkugel is the 
timeliness of the request for forgiveness (1 973). That is, it is performed as soon as 
the offender recognizes the offense. If a company responds either too swiftly or too 
slowly it can severely damage the response to the apology. An apology that is 
released too slowly denies the victims numerous options to deal with the damage 
caused by the crisis. This can portray the corporation as uncaring and inconsiderate 
and create a sense of hostility toward the organization. On the other hand, a 
response that is released too quickly can make it seem that the corporation is only 



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Firm's Image Restoration Strategies: 
Cases in Ethical Apologia in Corporate Crisis 

trying to get the crisis over with and escape the unwanted attention. Therefore, a 
company must attempt to determine when is the correct time to address the situation 
and reestablish their reputation. 

An ethical apology must also be voluntary and performed due to the desire of 
the corporation (Ware and Linkugel, 1973). The organization must be apologizing 
due to their will or from their own choice. A company must not be coerced by the 
public, media, or government officials to ask for forgiveness. The officials of the 
company must have their own desire and need to reconcile with the public and 
should strive to portray this desire. A voluntary apology provides the corporation with 
a sense of humility rather than anger toward the crisis and establishes them as caring 
and concerned about the safety of their consumers (Ware and Linkugel, 1973). By 
showing a sense of humility, the company will avoid receiving the reputation of being 
arrogant, proud, or assertive. The corporation must try to show their remorse and ask 
for forgiveness before the crisis is extensively acknowledged by the media or public. 

The apology must also address the stakeholders in the company because they 
will be affected by the course of action taken by the organization (Ware and Linkugel, 
1973). The company must ensure that they are speaking to all parties that have been 
or will be affected by the crisis. Even though some of the stakeholders will not be 
affected by the crisis, a company must ensure they target the people who have a 
moral problem or complaint regarding the situation. This presents the company as 
caring and concerned with the reputation of their company as well as the people who 
have an interest in the organization. Getting the stakeholders involved with the crisis 
will present the company as a responsible and alert firm. 



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Firm's Image Restoration Strategies: 
Cases in Ethical Apologia in Corporate Crisis 

Furthermore, an ethical apology must also be conducted in the appropriate 
context, according to Ware & Linkugel's findings (1973). The site, location, and 
medium chosen for the apology must be accessible to anyone involved in the crisis, 
particularly the stakeholders. As previously mentioned, the timing of an apology is 
essential to obtaining a positive response from the public. If a company responds too 
quickly, it can appear that they are only attempting to get the problem out of the way 
and forgotten about. A major offense that affects a company will be handled in a 
different matter than a private issue, and an apology given at the right place at the 
right time is essential to the company's success (Ware and Linkugel, 1973). 

Four Factors of Verbal Defense 

Ware and Linkugel theorized four factors of verbal defense to use during a 
crisis (1973). They derived these four resolution factors by researching and drawing 
from Robert Abelson's theory of belief-dilemma resolution. These four defenses are 
denial, differentiation, bolstering, and transcendence. Denial occurs when a company 
rejects any involvement in a crisis, while differentiation strives to remove a part of the 
crisis from the context. Bolstering occurs when a company takes full responsibility for 
their actions, while transcendence tries to link an outside factor to the crisis to provide 
a new perspective. All four of these factors are commonly used when providing self- 
defense during a crisis situation. Two of the factors, denial and bolstering, are 
reformative and do not attempt to change the meaning of the crisis, while two, 
differentiation and transcendence, are transformative because they try to change the 
public's perspective regarding the crisis. They all attempt to resolve the problem and 



Page 1 1 of 50 



Firm's Image Restoration Strategies: 
Cases in Ethical Apologia in Corporate Crisis 

restore the traditional order of business while providing closure and satisfactory 
apologia. 

The first factor of resolution established by Ware & Linkugel is denial, which is 
used by a company to negate their involvement in a crisis. Denial does not strive to 
change the public's overall opinion regarding a crisis; however, it attempts to remove 
the accused party from all wrongdoing (Ware and Linkugel, 1973). It tries to remove 
all relation to and participation in any negative act, while showing the company in a 
positive light. When using denial, a company insists that the harmful act never 
occurred or that they in no way had any influence over the events that happened as a 
result. The company can shift the blame to another party, minimize the impact of the 
crisis, or justify their actions regarding the situation. 

Differentiation, the second factor of resolution confirmed by Ware and 
Linkugel, attempts to remove some small part of a crisis from the larger context of the 
problem (1973). This is done in order to try to change the public's opinion regarding 
one of the factors involved in the situation. It allows the accused party a chance to 
present the problem in a more satisfactory and appealing environment. Therefore, 
the differentiation factor "consists of those strategies which represent a 
particularization of the charge at hand", maintain Ware and Linkugel (1973, p. 278). 
The company attempts to regain the trust and respect of the public by removing an 
offensive part from the crisis and presenting the situation from a different perspective. 

The third factor of resolution is bolstering, which is essentially the opposite of 
denial (Ware and Linkugel, 1973). It allows the accused party to take responsibility 
for their actions while showing a favorable side to the problem. Bolstering allows the 



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Firm's Image Restoration Strategies: 
Cases in Ethical Apologia in Corporate Crisis 

accused party to identify with the victims and attempt to regain their trust while 
showing the true value of their company and product. According to Ware and 
Linkugel, "denial is an instrument of negation; bolstering is a source of identification" 
(1973, p. 278). Bolstering is a strategy that attempts to strengthen the relationship 
between the accused party and the people affected by the crisis. 

The final factor of resolution covered by Ware and Linkugel is transcendence 
(1973). Transcendence is the opposite of differentiation because it tries to link 
another outside factor with the crisis in order to present a new perspective to the 
public. This strategy moves the audience's viewpoint away from the crisis and 
attempts to reinstate a more positive viewpoint. For example, a company accused of 
producing a defective product would present a product in the past that was reliable in 
order to prove they are concerned with the safety and health of their consumers. This 
strategy is used more often than differentiation because it presents the company in a 
positive perspective (Ware and Linkugel, 1973). 

Ethics and Social Responsibility 

Ethics seeks to address questions about morality and sometimes determines 
the values and customs of society. Ethical behavior in organizations has become 
more apparent in recent years and the management of individual ethical behavior in 
organizations has been researched in depth (Trevino, 2006). According to Trevino, 
author of Behavioral Ethics in Organizations, behavioral ethics refers to individual 
behavior that is judged based on moral norms and behavior that are considered 
acceptable (2006). Behavioral ethics is focused on individual behavior that occurs 

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Firm's Image Restoration Strategies: 
Cases in Ethical Apologia in Corporate Crisis 

within an organization, as well as the impact it has on the company. Trevino (2006) 
states that one useful method for outlining research on individual behavior is James 
Rest's four-component analysis, which distinguishes moral awareness, moral 
judgment, moral motivation, and moral behavior. His argument is that these are the 
steps of ethical decision making. 

Moral awareness, or moral issue identification, is the first step of this process 
and occurs when an individual recognizes that a moral problem exists in a particular 
circumstance (Trevino, 2006). This identification of an issue helps to initiate ethical 
decision making and makes it more likely that a person will conduct more ethical 
behavior. This stage essentially identifies the ethical issues that affect decision 
making and encourages individuals to conduct their actions in a more ethical way. 
The second step is moral judgment, which is based on Kohlberg's cognitive moral 
development approach (1969). This occurs when a person is aware of an ethical 
issue and can trigger ethical judgment. Kohlberg's theory establishes six stages of 
moral development. These stages include preconventional, conventional, and 
principled levels. However, Kohlberg discovered that very few Americans reach the 
principled levels of Stage 5 and 6. Therefore, ethical judgment is limited due to this 
lack of principles. 

Moral motivation is defined as the degree of commitment to taking personal 
responsibility for moral outcomes in a situation (Trevino, 2006). This describes an 
individuals desire to remain moral in their actions, and provides mediation between 
the relationships of moral attitudes and judgment to behavior. Moral emotions of guilt 
and shame contribute to moral motivation and can influence a person to be more 



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Firm's Image Restoration Strategies: 
Cases in Ethical Apologia in Corporate Crisis 

ethical in their actions. Moral behavior is the final step and occurs when an individual 

recognizes an ethical issue and changes their behavior accordingly. This stage can 

influence a person to be more ethical and righteous in their daily life. 

Some factors that influence ethical behavior are group size, leadership, locus 

of control, and peer-effects (Trevino, 2006). Ethics has been linked to the justice 

perceptions of employees as well as the conduct of employees. Organizational 

justice is considered to be employees' perceptions of organizational policies and 

practices being fair or unfair (Trevino, 2006). If a company can link the stages of the 

ethical decision-making process with organizational justice, the organization can be 

successful in remaining ethical on an organizational and individual level. Social 

responsibility is an ethical theory that a corporation or organization has a 

responsibility to society. Some critics (Friedman, 1970) argue that corporate social 

responsibility distracts companies from their goals; however, supporters (Trevino, 

2006) of corporate social responsibility argue that it is essential to the success of a 

company and a vital part of business. If an organization can influence organizational 

justice and social responsibility using ethics, the supporters claim and as this paper 

attempts to show, the public will perceive the company as being caring and 

concerned with society's well being. 

Cases of Image Restoration 

The following eight cases reveal prominent companies who have been 
presented with a crisis capable of ruining their success and reputation. Each 
company took a different approach to handling and assessing the effects of the crisis. 

Page 15 of 50 



Firm's Image Restoration Strategies: 
Cases in Ethical Apologia in Corporate Crisis 

Some of the companies, like McDonald's and Johnson & Johnson, were commended 
for their response. Others, like Exxon and Ford, showed little or no care or remorse 
for the public and potentially endangered the future of their company. These cases 
show the positive and negative aspects of differing image restoration strategies, as 
well as alternative strategies that could have provided more successful outcomes. 
The background information, situation facts, image restoration strategy used by the 
company, and the public's reaction to each crisis will be revealed and evaluated 
based on the previously mentioned research of Benoit, Gottschalk, and Ware and 
Linkugel. 

Ford Motor Company: The Pinto Case 

According to the Ford website, Ford Motor Company was founded and 
incorporated in 1903 by Henry Ford and is based in Dearborn, Michigan (Ford motor 
company heritage, 2009). Twelve investors started the company, and it has 
progressed into the fourth largest automaker in the world today. Ford's first 
automobile, the Model T, was first introduced to the public in 1908, and demand was 
so high for the product that other production facilities had to be established by the 
company. The Model T provided the pathway for Ford Motor Company to achieve 
more than $100 billion estimated sales each year. Ford has been owned and 
operated by the Ford family for over 100 years and was one of the only major 
companies to survive the Great Depression. Ford began producing the Pinto in 1970 
in order to compete with the smaller, more efficient vehicles being offered by foreign 



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Firm's Image Restoration Strategies: 
Cases in Ethical Apologia in Corporate Crisis 

car manufacturers. However, the company never imagined this car would place them 
in one of the most controversial crises in history. 

According to Douglas Birsch, author of The Ford Pinto Case, The Ford Pinto 
was introduced to the American market on September 11,1 970 (1 994). It was a 
subcompact car available to consumers in three different models. The different 
models offered by Ford included a two-door coupe, three-door hatchback, and two- 
door station wagon. The Pinto was introduced to the market as competition for the 
new import and domestic subcompacts. The car had a four-cylinder engine and was 
also known as the Mercury Bobcat. It was designed by Ford to be produced using 
little time and money throughout the next few years. Throughout the 1970's, 
numerous changes came about in the car manufacturing industry as there was a 
larger demand for safety regulations, better fuel economy, and higher performance. 
The Pinto grew to be the best selling subcompact car on the market at the time, until 
the mid-1 970's when it was discovered that a rear-end collision could cause it to 
catch fire. During the early production of the model, a major scandal surrounded the 
design of the car due to the allegations that a rear-end collision would allow the fuel 
tank to become easily damaged. According to Birsch, another problem surrounding 
the Pinto was the poor reinforcement of the doors which caused them to jam when 
involved in an accident (1994). The main factor in this scandal was the fact that Ford 
was aware of the defect throughout the early stages of production of the Pinto. The 
company used a cost-benefit analysis and came to the conclusion that it would be 
cheaper overall to pay off possible lawsuits for resulting deaths, rather than pay 
eleven dollars per car for repairs. Once the cost-benefit analysis was revealed, there 



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were over one hundred lawsuits that came about as a result, according to Birsch's 
research (1994). 

Francias Cullen, author of Corporate Crime Under Attack: The Ford Pinto 
Case and Beyond, claims the most influential lawsuit was Grimshaw versus Ford 
Motor Company (1994, p. 27). In May of 1972, Richard Grimshaw was traveling in a 
Ford Pinto hatchback with Lily Gray when they were struck by another vehicle. The 
impact caused the gas tank of the Pinto to be pushed forward and punctured, 
resulting in the car erupting into flames. Both victims survived the immediate impact 
and aftermath of the crash, but Gray died of congestive heart failure caused by the 
crash a few days later. At the time, the victims' Pinto was less than six months old 
and had only been driven about three thousand miles. Grimshaw suffered from 
permanently disfiguring burns to his entire body, and both families sued Ford Motor 
Company. After a six-month trial, the Gray family was awarded $559,680 in 
compensatory damages while Grimshaw received $2.5 million for compensatory 
damages and $125 million for punitive damages, according to Cullen (1994). 

The gas tank of the Pinto was placed only six inches away from the bumper of 
the car, and the company was more concerned with getting their product on the 
market rather than making it safe. Oregon was the first state to remove the Pinto from 
its car lots; however, after the public and media began to attack the company, Ford 
finally ordered a recall of 1 .4 million Pintos, out of the 2 million originally produced, 
according to Birsch (1994). They reinforced the gas tank by surrounding it with two 
high density polyethylene shields. The main concern for Ford during this time period 
was protecting their image rather than protecting the overall safety of their 



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consumers. The lowest reported speed causing an explosion was 21 miles per hour, 
and at least fifty-nine people died in accidents involving the Pinto, according to Cullen 
(1994). The media began to attack Ford and question the overall safety and reliability 
of the rest of their products. Ironically, Ford had not worried about the amount of fines 
and lawsuits resulting from this mistake, but had only cared about protecting and 
preserving the image they had obtained up until that point. 

The image restoration strategy used by Ford during the Pinto crisis was 
evading responsibility. The company was aware of the problem before the vehicle 
ever started being sold to consumers, and they decided to continue production rather 
than pay to fix the problem. The company faced severe criticism and a decrease in 
sales as a result of their decisions. The case of the Ford Pinto affected the amount of 
trust consumers had in the company and the overall willingness to buy products from 
Ford. By refusing to accept responsibility for their defective product, the company 
was viewed as uncaring and unconcerned with the health and safety of their 
customers. They chose to increase their profits rather than protect the lives of their 
consumers, resulting in lost profits as well as lawsuits. Ford had the ability to correct 
the defective gas tank before selling the vehicle, but they chose to put the lives of 
innocent people at risk in order to make money. The company was able to survive 
this crisis; however, their profits in the years after the incidents struggled and they 
had to prove their safety and concern to the public who had witnessed the Pinto 
madness (Gottschalk, 1993). 

In my opinion, the actions taken by Ford after the Pinto crisis were damaging 
decisions. Once it was revealed that they used a cost-benefit analysis to determine 



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the potential damage between paying lawsuits and correcting the problem, Ford 
revealed that their main goal was to make money, rather than consider the safety of 
their customers. By using denial and evading responsibility, Ford's image restoration 
strategies were unsuccessful in retaining their reputation of being a caring, safe 
company that produces quality products. 

The Exxon Valdez Oil Spill 

According to the ExxonMobil website, Standard Oil, founded in 1863 by John 
D. Rockefeller, was one of the world's first multinational corporations (ExxonMobil- 
Our history, 2003). The company incorporated in 1870 and controlled 90 to 95 
percent of oil production in the United States from 1870 until the early 1900s. In 
1911, the Supreme Court ordered the company to be broken up into smaller portions 
in the Standard Oil antitrust settlement. Eight companies retained the name Standard 
Oil after the breakup of the company, but after numerous mergers and takeovers 
many of the branches of Standard Oil are renamed today. Three of the companies 
that resulted from this breakup were Esso, Enco, and Humble Oil, and these three 
companies merged on January 1, 1973 to form Exxon. Exxon merged with Mobil on 
November 30, 1999, but before this merger took place Exxon was a crucial part in 
one of the most disastrous oil spills in the history of the United States. 

According to Peter Wells, author of Exxon Valdez Oil Spill, in the early 
morning of March 24, 1989, over ten million gallons of oil were spilt on the coastline 
of Alaska (1995). This spill was the first one to ever occur in the waters of the United 
States. Although no deaths resulted from the spill, the information regarding the 

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situation that was reported caused serious conflict and backlash for Exxon's ethical 
reputation. The tanker at the center of the Exxon Valdez crisis was 987 feet long and 
beginning a five-day run to Long Beach, California. It was one of the newest, best 
equipped tankers in the Exxon fleet and was departing the area base of operations. 
The area chosen for shipping crude oil from the North Slope was known as "the little 
Switzerland of Alaska" due to the beauty and grandeur of the region. The Exxon 
Valdez oil spill was similar to the Amoco Cadiz spill of 1 978 off the French coast; 
however, the Cadiz spill resulted in seventy millions gallons of oil being spilled into 
the water, according to Wells (Wells, 1995). 

Wells maintains that the main reason Exxon's spill was so controversial was 
because it was the first to occur in United States waters, and the moments leading up 
to the spill provided very disturbing images (Wells, 1995). This information was 
extremely damaging to Exxon's reputation and the future of their business. The first 
disturbing detail was the crew's response time after running aground; it took the crew 
twenty-three minutes to report the crash to the Coast Guard, which is critical time for 
gallons of oil to pour into the ocean, considering 20,000 barrels of oil escaped into 
the water per hour. The next disturbing detail was the captain of the Valdez, Joseph 
Hazelwood, had consumed two alcoholic beverages before taking over control of the 
tanker. Captain Hazelwood was fired on March 30 th for his irresponsible, dangerous 
behavior. Overall, the tanker dumped 260,000 barrels (over 10 million gallons) of 
crude oil into Alaska's Prince William Sound. Another disturbing fact was that the 
chairman of Exxon, Lawrence Rawl, did not visit the site of the spill until twenty-two 
days after the accident occurred. Laurence Barton, author of Crisis in Organizations 



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//, maintains that "company officials were painfully slow to recognize the enormity of 
the environmental nightmare that was unfolding and the depth of the public relations 
nightmare facing them." (2001, p. 3). Eventually, however, a full-page apology 
appeared in 166 newspapers across the country on April 3 rd explaining the damage 
of the spill and the steps being taken to repair the damage. 

Unfortunately, the media had already begun attacking the reputation and 
safety record of the company before this apology was released. Exxon credit card 
holders around the country were cutting up their cards and sending them to the 
company (Barton, 2001). Overall, forty thousand Exxon credit card holders listened to 
this advice and destroyed their cards. The public perception of the spill was that it 
had caused gas prices throughout the world to rise and this resulted in controversy 
and anger. Gas prices rose at an average of ten cents in the weeks following the 
spill. However, the spill had very little visible impact on their business other than 170 
lawsuits filed against the company. By the summer of 1992, the area affected had 
been entirely cleaned up; however, only fourteen percent of the oil spilled was netted 
and completely eradicated. According to Wells, The Exxon Valdez oil spill ultimately 
contaminated 486 miles of shoreline and killed hundreds of thousands of birds, sea 
otters, and other animals (1995). 

The major mistakes made by Exxon when dealing with its crisis was its slow 
reaction, shift of blame, and avoidance of responsibility. The company was extremely 
unprepared for a disaster of this proportion; therefore, the public perceived this as a 
lack of concern for the safety and conservation of the environment. The company 
missed major opportunities to correct the crisis within the media, government, public, 



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and the environment. The spokespeople they presented to the public seemed 
unprepared and uncaring, and the company ultimately profited from the spill due to 
the increase in gasoline prices. In general, the top executives and management of 
Exxon were not involved in ameliorating the crisis and did not take a realistic 
approach to resolving the issues. 

The image restoration strategy used by Exxon in the Valdez oil spill was 
evading responsibility. The company used defeasibility to prove that they had a lack 
of control over the situation but were doing everything in their power to resolve the 
spill. However, the captain of the tanker had consumed alcohol hours prior to the 
spill, and the company seemed unconcerned with reporting the incident or cleaning it 
up. In order to regain the public trust, Exxon should have shown sincere concern, 
admitted they made a mistake, and promised to make sure it never occurred again. If 
a crisis like the oil spill had occurred in any other industry, the impact on the company 
would have been devastating. However, since Exxon has such a large control over 
the oil industry they were able to recover from the crisis and achieve a sales level 
they had prior to the spill (Gottschalk, 1993). Exxon's actions after the Valdez oil spill 
were completely unethical and lacked a sense of social responsibility that is expected 
from a corporation with their power. 

I believe that the decisions made by Exxon during and after the Valdez oil spill 
were not thought through and damaging to the company. Exxon denied responsibility 
for the accident; however, the captain was intoxicated at the time of the crash, and it 
took valuable time for the crew to call in the spill to officials. Another mistake made by 
the company was the lack of remorse and refusal to clean up the spill without being 



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forced to do so. The image restoration strategies used by Exxon, evading 
responsibility and differentiation, attempted to remove the company from any fault in 
the accident. However, if they had used corrective action and rectified the problem, 
the public opinion of the company would not have been tarnished. 

Murder at McDonald's 

According to the McDonald's website, Dick and Mac McDonald opened the 
first McDonald's restaurant in San Bernardino, California in 1940 (McDonald's 
history- About McDonald's, 2009). The company was franchised in 1955 in Des 
Plaines, Illinois, by Ray Kroc. It has grown into the largest fast food chain restaurant 
in the world today, serving nearly 47 million people. The McDonald's logo is 
recognized worldwide, and the restaurant currently operates in 1 19 countries with 
more than 31 ,000 locations throughout the world. Ronald McDonald's smile is 
regarded as "the smile known around the world." The famous Big Mac was 
introduced in 1968 and is the most popular fast food item in the world today, 
according to the website. The multibillion dollar company is also a major contributor 
to charities around the world and opened the first Ronald McDonald house in 1974 to 
provide critically ill children and their families with a place to call home while 
undergoing treatments. McDonald's caters to everyone but mainly focuses on 
families with young children, which is why the occurrences on July 18, 1984 came as 
such a shock to the community and world. 

According to Gottschalk, on that day in a McDonald's restaurant in San Ysidro, 
California, a man named James Huberty entered the restaurant and began a 

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shooting rampage (1993). After he was finished, there were twenty-one dead and 
nineteen wounded in the massacre. McDonald's top management and executives 
immediately began researching the appropriate steps to take regarding the situation. 
The events occurring immediately after the shooting were handled by law 
enforcement officials and hospitals in the area; however, McDonald's had to ensure 
that their image as a safe, dependable family restaurant was not tainted by the crisis. 
Top management decided to pay all hospital bills of people wounded in the shooting 
in order to make sure their customers remained loyal and felt cared about. They also 
flew the relatives of all victims into the area for the funerals, as well as provided 
counseling services for the families of all the victims. The executives of McDonald's 
also demonstrated their compassion by attending the funerals of eleven victims of the 
shooting. Furthermore, McDonald's established their concern for the people rather 
than only for their profit by removing all ads from television and radio. According to 
Gottschalk, this step cost the company more than $22 million. 

The media was the main opponent McDonald's faced when attempting to 
reestablish their reputation as a safe, hometown restaurant. They were calling the 
massacre "the Big Mac Attack in California" and essentially putting the focus on the 
fact that the shooting had occurred in a McDonald's. Radio broadcasts called the 
shooting the single largest massacre in American history and proceeded to publicize 
the event throughout the nation. The first step McDonald's had to take in addressing 
these events was to issue a statement emphasizing their compassion and apologies 
for the affected families, as well as offering their assistance in any way regarding the 
investigations or any medical needs. The second step was their decision to take all 



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advertisements off the radio and television until further notice. Another important 

decision facing the company involved what to do with the restaurant in which the 

shooting occurred. The final decision was to close the current location and tear the 

building down while donating the land to the local neighborhood to use at their 

discretion. 

McDonald's built another restaurant three blocks away from the first location 

but did not have any press releases or media coverage following the grand opening 

of the store. Overall, the decisions and actions taken by McDonald's after this 

devastating tragedy were imperative to the future success of the company. The main 

advantages for the company were the clear cut directive of top management 

regarding the situation, as well as the extensive amount of communication between 

the company and media. They were able to establish a local presence in the 

community by meeting with the local media and a pastor in order to determine what 

the appropriate steps would be. Another important advantage for McDonald's was the 

creation of a survivor fund in order to provide assistance to the victims and the 

neighborhood. According to Gottschalk, the fund was started by Joan Kroc, the 

widow of McDonald's founder, and she donated $100,000 herself to those affected 

(1993). McDonald's followed this initiative by contributing $1 million to the survivor 

fund, as well as the land from the initial restaurant. These approaches were essential 

in preserving and protecting the company name and furthering the success of the 

restaurant. After the shooting, sales in McDonald's restaurants in Southern California 

decreased but came back strong after a few months. Furthermore, ninety-nine 



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percent of people agreed with the decisions made by McDonald's and continued to 
view the company in a positive light (Gottschalk, 1993). 

The image restoration strategies used by McDonald's throughout this crisis 
were corrective action and mortification. The company aimed to restore their 
reputation to the status it was prior to the shooting, while providing the necessary 
assistance for those involved and respecting the lives of the people killed. They also 
attempted to make changes in order to ensure that this type of situation would never 
occur again in one of their restaurants and to protect their customers. The company 
accepted that while the shooting took place due to the emotions of James Huberty, 
they needed to guarantee that their employees and customers were safe. Since 
McDonald's seemed extremely sincere and caring for the victims and their families, 
their apology and attempt at restoring their reputation was successful and the 
achievements of the company continues to grow. 

The choices made by McDonald's after the shooting were correct and 
successful in establishing and maintaining their reputation. By using corrective action 
and bolstering, McDonald's was able to ensure the future safety of their customers 
while respecting the feelings of the victims. The sincerity showed by the company 
after the shooting confirmed their concern for their customers and strengthened their 
character. In my opinion, the image restoration strategies used by McDonald's, as 
well as the actions taken by top management, were imperative to retaining customer 
support and loyalty. 



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AT&T Network Breakdown 

According to the AT&T website, in 1983, AT&T was formed as Southwestern 
Bell Corporation and is currently headquartered in Dallas, Texas (AT&T corporate 
history, 2009). The corporation acquisition made by the company included takeovers 
of Bellsouth, Pacific, Telesis, Southwestern Bell, and Ameritech. AT&T finished the 
year 2007 as the largest telecommunications company in the world, and was also 
named among the 50 World's Most Admired Companies by Fortune (America's most 
admired companies, 2007). AT&T employs more than 300,000 people worldwide and 
provides the most reliable, innovative products in the industry. AT&T operates and 
maintains the worldwide long distance network. The communications network of 
AT&T is one of the most well established systems in the world, which made the 
breakdown of the network on January 15, 1990 even more alarming. 

According to Gottschalk, on that day, the long distance network of AT&T failed 
and was shut down for nine hours (1993). This type of telecommunications crisis had 
never occurred before, and the company was at risk of losing more than 35 million 
calls per hour. Top management of AT&T feared that they would be forced to shut 
down the entire network in order to restart it. The officials of the business remained in 
contact with the media throughout the scandal and explained that the network had 
failed, they were not sure why, and they were working to fix it as soon as possible. 
Fortunately, AT&T remained in contact with the public and kept them updated on the 
events occurring with the network throughout the entire nine hours it was down. 
Whenever a customer attempted to make a call throughout the network failure, they 
would either receive a busy signal or a recorded message explaining what was going 

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on and that the company was taking all efforts to correct the problem. The only sector 
that remained unaffected by the network failure was private line services, such as 
businesses and the government. 

AT&T attempted to find the source of the failure and fix it while providing their 
customers with access to a competitor's long distance service. They provided the 
long distance calling codes of their competitors in order to ensure that their 
customers were able to make their call and remain satisfied with the company. The 
company discovered two hours into the investigation that the failure was not due to 
hackers or sabotage, and that the problem most likely resulted from the new 
signaling software they had installed. A signaling system is a data network that 
connects long distance switching machines and overlays the regular network that 
transmits voices. It also carries all the information regarding called and calling 
numbers. According to Gottschalk, the two main problems resulting from this 
discovery was the fact they may be forced to shut down the entire network, and the 
media wanted access to the original site of the signaling software, which was located 
in lower Manhattan. The solutions used by AT&T were to conduct a press conference 
regarding the problems with the signaling software and to provide customers with a 
discounted day of calling for their inconvenience. By 10:30 that night there were only 
a few problem areas remaining throughout the network in the Midwest, and the media 
attention surrounding the crisis had significantly decreased. 

AT&T was successful in resolving this crisis due to their updates with the 
media, communication with employees and customers, and compensating those 
involved with a discounted calling day. In Gottschalk's view, "the best way to be 



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prepared for a crisis is to have a professional staff and the support of top 
management" (Crisis response, 1993, p. 24). The main complaint the company faced 
throughout their crisis was the inability to access competitor's access codes in a 
timely manner. Therefore, the company formulated a new policy after the crisis where 
the access codes for competitor calling would be revealed within minutes of a 
problem. AT&T established February 14 th as the discounted calling day, and on that 
day more than 124 millions calls were processed throughout the world. In recent 
years, AT&T has began handling more than 130 millions calls per day on average, 
and the survey conducted recently after the crisis revealed only 1 out of 10 
customers' opinion on AT&T had changed (Gottschalk, 1993). 

The image restoration strategy used by AT&T throughout their crisis was 
reducing the offensiveness in the form of compensation as well as mortification. The 
company admitted they were at fault and resolved to fix the problem and reinstate the 
reputation that they possessed prior to the crisis. They also apologized to their 
customers for any inconvenience the network failure could have caused them and 
provided the access codes of competitor companies in order to ensure that their 
customers' calls could go through and they would be satisfied. For any customer who 
felt inconvenienced or unsatisfied, AT&T provided a discount day of calling in order to 
reduce the offensiveness of the network failure. An international network failure could 
have potentially caused the collapse and breakdown of the entire company. If they 
had made an incorrect decision or were unable to fix the problem, one of the largest 
telecommunications companies in the world could have collapsed. 



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In my opinion, the decision by AT&T top management to remain in contact 

with the media as well as their employees and consumers provided them with the 

opportunity to seem caring and concerned for the well being of the public. They also 

furthered this caring attitude by presenting their customers with a discounted calling 

day in order to ensure that they are the best communication network in the world. By 

using compensation and mortification, AT&T was able both to admit they had made a 

mistake and attempt to restore faith in their company. Without the prompt response of 

AT&T officials, January 15, 1990 could have ruined the success and reputation 

achieved by all former companies that comprised the AT&T network. 

Gerber: Baby Food Glass Contamination 

According to the Gerber website, Daniel and Dorothy Gerber founded Gerber 
baby food in 1927 at their home in Fremont, Michigan, in order to feed their newborn 
baby with healthier strained foods {About our story-Gerber, 2009). Their first baby 
cereal was produced in 1932, and Gerber currently produces more than 190 products 
in over 80 countries and controls around 83% of the baby food market in the United 
States. Their products range from baby food to all types of products needed for 
babies and young children. Gerber is known as one of the safest, healthiest brands in 
the baby industry, and they have recently partnered with Nestle on their "Start 
Healthy, Stay Healthy" campaign for children throughout the world. The actions taken 
by Gerber show how committed they are to the safety and health of their consumers; 
therefore, the complaints received throughout 1986 were appalling to millions 
throughout the world. 

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According to Gottschalk, the complaints involving Gerber products throughout 
1986 spread across 40 states and were reported in countries as far away as Australia 
(1993). The complaints dealt with the discovery of Gerber baby food containing small 
pieces of glass in some containers. Fifty percent of the people who were affected by 
this crisis, or discovered glass, contacted the media first before contacting Gerber in 
order to file a complaint. This was the second time in Gerber history that a product 
was under scrutiny and the future success of their company was threatened. In 1984, 
Gerber recalled fruit juice packets in several states due to the discovery of glass 
pieces. The company removed 550,000 jars of juice from the market on September 
28, 1984. Throughout that year, the reputation of Gerber was tarnished and the sales 
of baby food dropped over 4 percent. However, once the company recalled millions 
of dollars worth of juice, the Food and Drug Administration found no evidence of 
glass from manufacturing-related causes, and Gerber realized the media and 
consumers had only assumed the products were contaminated. Prior to the 
complaints in 1986, Gerber has adopted a no-recall strategy unless the action was 
justified by the company's findings or discoveries by the FDA. This strategy 
prevented Gerber from recalling all baby food, and the decision created an intense 
amount of criticism against the organization. 

The first action Gerber took in their crisis was to contact the media in order to 
stop local complaints before they could be broadcasted. The FDA inspected over 
36,000 jars of baby food and was unable to find anything that justified a recall; 
however, the lack of a recall caused the public to view Gerber as uncaring and 
irresponsible. Gerber, using the findings of the FDA in order to justify their analyses 



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of the crisis, launched an aggressive consumer communications effort to correct the 

damage. According to Gottschalk, the president of Gerber issued 75,000 personal 

letters that were sent to families who had complained about the glass and consumers 

of the product (1993). Throughout the first 60 days of their effort, the company 

conducted 112 interviews with media as well as consumers in order to ensure the 

safety of their products. The company remained in contact with all investors and 

employees in order to keep them up to date and aware of what was going on with the 

crisis. By January of 1987, Gerber stocks were at 66.3% versus 66% prior to the 

crisis and 52.5% throughout the crisis (Gottschalk, 1993). 

By learning from their overreaction in 1984, Gerber was able to remain 

profitable while ensuring the safety of their consumers. Gerber top management 

remained relatively quiet regarding the issue other than enacting a lawsuit against 

the state of Maryland in order to return their product to store shelves throughout the 

state. The company attempted to downplay the incident and continue on with normal 

business while avoiding the cost and negative publicity that had surrounded the 1984 

juice recall. From a legal and financial perspective, Gerber made the right decision in 

remaining low key and not recalling the products. Gerber founded their company on 

the basis of providing safe, quality products and, in order to prove they cared, the 

company should have responded within 24 hours after the story was revealed. The 

option of providing tamperproof packaging was introduced after the Tylenol crisis 

(described below), and Gerber should have looked into it to prevent tampering in the 

future. Fortunately, Gerber's response to the crisis allowed them to maintain their 

legal and financial reputation, as well as proved their concern for public safety 



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The image restoration strategy used by Gerber throughout their crisis was 
corrective action. By recalling the juice boxes in the 1984 scare, Gerber proved that 
they cared about their customers and were concerned with the overall safety of their 
products. They were able to determine where the initial cause of the crisis came from 
and include an apology for their mistakes. After learning from their 1984 crisis, 
Gerber was able to handle the 1986 crisis using corrective action again as well as 
reducing the offensiveness of the ordeal. They minimized the negative impact that 
the crisis could have had on their company and did not attempt to deny any 
involvement in the act. The fact that they accepted responsibility for their problem 
and investigated the dangerous products allowed Gerber to remain successful and 
accepted by the public. 

By considering the actions taken in their previous scare, Gerber was 
successful in restoring their image during the crisis in 1986. In my opinion, the 
company was right to reduce the offensiveness of their crisis due to the findings of 
the FDA. By also using corrective action, Gerber showed they took full responsibility 
for their products and ensured their safety and quality. Even though the crisis of 1986 
was only a scare, the complaints were taken seriously by top management of Gerber 
and established them as a caring, safe company that is concerned with the public. 
Furthermore, their recall in 1984 reinforced this concern. 

Union Carbide Gas Leak 

According to the Union Carbide website, the company was founded in 1917 by 
George Curme and is currently headquartered in Houston, Texas (Union Carbide 

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history, 1995). The company, one of the oldest chemical and polymers companies in 
the United States, is a subsidiary of Dow Chemical. The first patent for chemical 
ethylene was filed by Curme two years after the company was founded. Sixty-seven 
years after the founding of Union Carbide an act of sabotage risked the lives of their 
employees as well as the future of the entire company. The gas leak occurred at an 
UCIL plant in Bhopal, India, where Union Carbide owned over half of the stock in the 
company. Union Carbide began investing in UCIL (Union Carbide Limited India) in 
1934 and employed around 9,000 people with 14 plants throughout the country. 
However, the disastrous events of December 3, 1984, almost led to the destruction of 
the company's world famous reputation. 

According to Benoit, on that day, more than 2,000 people were killed and 
200,000 injured due to escaping poisonous gas from the Union Carbide Plant in 
Bhopal, Madhya Pradesh (1995). The gas leak affected over 500,000 people in the 
immediate area surrounding the plant. The government of India charged the 
Chairman of Union Carbide, Warren Anderson, with homicide and initiated extradition 
proceedings against him. On December 8, 1984, five days after the disaster, Warren 
Anderson attempted to visit the site of the tragedy and was arrested upon arrival. The 
company then proceeded to issue an official statement on December 10 th apologizing 
for the incident and vowing to never let it occur again. The statement they released 
portrayed the company as caring and concerned with the safety and health of the 
people in India. It also revealed a favorable image of the company because it offered 
condolences to the people of India as well as proved the company would be 
cooperative with any investigations regarding the leak. 



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Union Carbide discovered that the leak was caused by an angry employee 
who added water to a storage tank causing the compound to become a lethal gas 
escaping into the night air (Benoit, 1995). The initial report of the leak reached Union 
Carbide officials twelve hours after it first occurred. The plant in India was in the 
process of celebrating its 50 th anniversary, and Union Carbide India Unlimited had 
earned more than $200 million in sales the previous year. Therefore, the report of a 
potentially damaging gas leak was detrimental to the future success of the company. 
Furthermore, the company experienced a 27 percent reduction in the value of their 
stock after the gas leak occurred (Barton, 2001). Union Carbide was known 
worldwide as a company that invested in other countries in order to contribute to 
growing economies around the world. The Bhopal plant was created in order to 
supply pesticides throughout India and protect the agriculture of the country. The 
initial victims of the gas leak were the families of employees who lived in the plant's 
surrounding shanty towns. The gas leak at Bhopal has been named as the worst 
industrial disaster in history, according to Benoit (1995). 

The first symptoms felt by people in the area surrounding the plant were 
cough, burning eyes, vomiting, and suffocation. Children and people of shorter 
stature inhaled higher amount of the gas due to being closer to the ground, and many 
people in the area were trampled as they tried to escape the gases. Three thousand 
of the people who inhaled the toxic gas were pregnant women, and as a result the 
stillbirth rate in the area increased to over three hundred percent. The government of 
India estimates that since the leak twenty thousand other people have died as a 
result of gas-related diseases, and another 100,000 to 200,000 have permanent 



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injuries (Gottschalk, 1993). Union Carbide responded to the negative publicity 

surrounding the gas leak by taking four necessary steps to restore their image. They 

contributed $830,000 to the relief fund, established an orphanage for the children left 

homeless from their parents being infected, as well as provided medical supplies and 

assistance to people harmed by the gas. All of their actions were voluntary, and the 

company assured their customers and shareholders that this type of accident would 

never occur again. These steps helped Union Carbide remain favorable in the eyes 

of the public, and Benoit discovered that only 18 percent of people blamed them for 

the gas leak. 

The image restoration strategy used by Union Carbide after their India plant 

gas leak was bolstering and corrective action. The company attempted to take 

positive aspects regarding their business in order to offset the negative publicity they 

were getting as a result of the deadly lead poisoning. This helped to minimize the 

negative impact that the crisis might have on their company and kept the 

shareholders confident in their investment in the company. The stock for Union 

Carbide dropped to below $33 per share immediately after the leak, but six months 

after the crisis it was back up to over $60 per share (Benoit, 1995). This and the fact 

that only 18 percent of people blamed the company for the leak proves that the 

restoration strategies used by Union Carbide were successful in maintaining the 

reputation and success of the company. The four actions they took to correct their 

mistake were contributing to the relief fund, setting up the orphanage, and providing 

medical supplies and assistance for the infected. They also released a statement a 

week after the disaster occurred which showed they were caring and concerned with 



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the health and safety of the citizens of India. Furthermore, they vowed in their 
statement to never let this type of crisis happen again and protect the health of their 
consumers all over the world. Another emphasis of the bolstering image restoration 
strategy occurred when the Union Carbide chairman visited the site after knowing he 
would be arrested upon arrival. This showed that they were committed to the cleanup 
of the site and were genuinely concerned with the well being of the Indian citizens. 
Overall, the actions taken by Union Carbide after the Bhopal disaster were successful 
in maintaining the upstanding reputation and success of the company. 

The image restoration strategies used by Union Carbide during the Bhopal 
disaster were successful in showing their concern for the safety of the public. By 
using corrective action and bolstering, I believe the company made the correct 
decisions and furthered the success of their company by doing so. The Bhopal 
disaster could have been detrimental to the future profits and success of Union 
Carbide; however, the actions of the company after the gas leak proved their 
dedication to public safety and environmental protection. 

The Tylenol Poisonings 

Johnson & Johnson, founded in 1886 by Robert Wood Johnson, James Wood 
Johnson, and Edward Mead Johnson, is the parent company of Tylenol. According to 
the Tylenol website, it was first used for medicinal purposes in 1894, but did not gain 
widespread use until 1948 when a group of scientists discovered another popular 
medication, acetanilide, was toxic (Johnson & Johnson, 1997). Johnson & Johnson is 
listed among the Fortune 500, and their products are sold in over 175 countries 

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throughout the world. According to the Johnson & Johnson website, the company 
was founded on the basis of providing sterile, safe sutures, dressings and bandages 
to treat wounded people. It expanded into a worldwide company throughout the 
1920s and 1930s, and the products they provide have transformed the overall health 
and well being of million. Tylenol's mission statement proclaims "We work for you", 
which makes the events in the fall of 1982 even more shocking. 

According to Gottschalk, throughout the fall of 1982, seven people were fatally 
poisoned by Extra-Strength Tylenol medicine capsules (1993). It was discovered that 
the products had been contaminated with potassium cyanide, and that the culprit had 
tampered with the medication in various drug stores and supermarkets throughout 
the Chicago area. Eight bottles were found to be contaminated with the lethal 
contents, five of which eventually led to the victims' deaths. Johnson & Johnson 
halted the production and advertisement of Tylenol and sent out warnings to the 
hospitals and distributors of the drug. The company also began playing 
advertisements which warned against the use of Extra Strength Tylenol due to the 
potential poisonings of other bottles. On October 5, 1982, Johnson & Johnson issued 
a mandatory recall of all Tylenol products, consisting of 22 million bottles and over 
$100 million retail value (Barton, 2001). This recall proved that they were genuinely 
concerned with the health and safety of their consumers, and it proved to the public 
and media that the company had no prior knowledge of the tampering. 

The first victim of the Tylenol poisonings, Gottschalk maintains, was twelve- 
year-old Mary Kellerman, who took the lethal drug and died shortly after on 
September 29, 1 982 (1 993). Her death was shortly followed by the deaths of Adam 



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Janus, Stanley Janus, and Theresa Janus who all passed away after taking pills from 
the same bottle. The final three known victims of the Tylenol poisonings were Mary 
McFarland, Paula Prince, and Mary Reiner. After their deaths were linked to the use 
of Extra Strength Tylenol, there were urgent warnings broadcasted on radio and 
news stations throughout the Chicago area, as well as policemen using loudspeakers 
to broadcast the potential poisonings throughout Chicago neighborhoods. An 
investigation into the production of the pills began immediately, and when it was 
discovered that the bottles had all come from different factories investigators realized 
the problem did not involve the production process. They investigated supermarkets 
and drug stores that had been targeted by a culprit who took the packages and 
altered them with cyanide before replacing them on the product shelves. This is why 
three other bottles were discovered with cyanide traces in the Chicago area. After 
Johnson & Johnson realized the problem came from their products being tampered 
with, they allowed consumers to exchange all Tylenol capsules that had been 
purchased prior to the crisis. 

The media commended Johnson & Johnson for the steps they took in dealing 
with the crisis and protecting the safety of their consumers. Prior to the poisonings, 
Tylenol possessed 35 percent of the market, which drastically reduced to 8 percent at 
the time of the scare; however, due to the superior action taken by the company in 
dealing with the crisis they were able to reestablish their success and reputation less 
than a year later. According to Gottschalk, the company reintroduced the Extra 
Strength Tylenol capsules to the market in November with a triple-sealed package 
that helped ensure the safety of the product (1993). The company also offered their 



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customers several price discounts when purchasing products, and this allowed 
Tylenol to become the most popular over the counter medication in the United States 
a few years later. These actions allowed Johnson & Johnson to regain the reputation 
they had prior to the poisonings, as well as restored the trust consumers had in the 
products offered by the company. 

Johnson & Johnson was praised for the actions taken after the Tylenol 
poisonings, and after a brief period of decreasing and lost sales the company 
returned to success and Tylenol continued as one of the top selling products. Sales 
of Tylenol collapsed from thirty-five percent to eight percent at the time of the scare, 
but the product bounced back in less than a year. By reintroducing capsules in a 
heavily sealed package with price promotions, Tylenol returned as the popular 
painkiller. After the incident, tamper resistant packaging was invented in order to 
prevent scares like this from occurring in the future. After the initial situations, there 
were 270 incidents of suspected product tampering reported in the month following 
the poisonings. Johnson & Johnson was able to regain about ninety-eight percent of 
the market shares it possessed prior to the incident. By providing a crisis hotline, 
offering $1 ,000 for any information on the incidents, and warning people of the 
potential consequences from taking the medication, Johnson and Johnson was able 
to maintain its reputation of being caring and concerned for their consumers. 

The image restoration strategy used by Tylenol after the Extra Strength 
capsules were contaminated with cyanide was corrective action. They were able to 
correct the problem created by their product without admitting guilt for the crisis that 
had occurred. They vowed that this type of situation would never occur again in the 



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future by changing the packaging of the product and introducing tamper resistant 
material to the capsules. The company also provided a warning to all consumers 
against the harmful effects the capsules could have on their health. By offering a 
mandatory recall on all their products, the company lost an estimated $100 million; 
however, this action illustrated that they were not concerned with their profit and had 
a higher concern for the health and safety of their consumers. By using this image 
restoration strategy, Johnson & Johnson was able to obtain the sales and market 
share they had prior to the crisis and Tylenol became the top-selling over-the-counter 
medication in America. 

I believe that the image restoration strategies used by Johnson & Johnson 
after the Tylenol poisonings were successful in continuing the achievements of the 
company as well as their profits. Corrective action and bolstering allowed the 
company to correct the problem by creating tamper-proof packaging that ensured the 
safety of their products. Companies can learn from the actions taken by Johnson & 
Johnson during the Tylenol poisonings in order to protect their success and profits 
from a crisis, in my opinion. 

Calnev Pipeline Rupture 

According to the Kinder Morgan website, the Calnev pipeline is an oil pipeline 
located in the United States that carries gasoline, jet fuel, and diesel fuel from Los 
Angeles, California, to the northeast side of Las Vegas, Nevada {Kinder Morgan 
company history, 2009). The fuels are carried from Los Angeles refineries to Nellis 
Air Force Base and McCarran International Airport in Las Vegas, Nevada. The 

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pipeline is approximately 550 miles long and carries around 128,000 barrels of fuel 
per day, or over five million gallons. Kinder Morgan Energy Partners own the pipeline, 
which also runs along an area where a Southern Pacific freight train runs. Southern 
Pacific Railroad was founded in 1865, and extended from New Orleans, Louisiana, to 
Los Angeles, California, with various stops throughout Texas, New Mexico and 
Arizona. In 1988, Rio Grande Industries purchased Southern Pacific; however, the 
name was kept due to the amount of brand recognition throughout the United States. 
Furthermore, in 1996 Union Pacific Railroad took over Southern Pacific after years of 
financial problems. However, the major crisis affecting both of these companies 
occurred shortly after the takeover by Rio Grande Industries. 

On May 12, 1989, a South Pacific freight train derailed in San Bernardino, 
California. The train derailment resulted in the deaths of the conductor, brakeman, 
and two residents on the train. It also destroyed seven homes as well as the entire 
train. According to Gottschalk, the train derailment was caused by a weight 
miscalculation that occurred due to the transportation of 6,900 tons of trona, which is 
a material used in the production of fertilizer (1993). This miscalculation caused the 
train to weigh much more than they originally thought, and the brakes were not 
powerful enough to stop the train. The Southern Pacific freight train was estimated to 
be moving at around 1 1 miles per hour when it entered a turn in San Bernardino 
that cannot handle speeds above forty miles per hour. 

Unfortunately, the Calnev pipeline is also buried six feet underground along 
the railroad right of way. Initial inspection of the pipeline showed no damage as a 
result of the train derailment; however, the cleanup operation did cause undetected 



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damage to the line. Thirteen days after the train derailment, the Calnev pipeline 
ruptured spilling thirteen thousand gallons of gas throughout the San Bernardino 
neighborhood. On May 25, 1 989, a three-hundred-foot pillar of flames erupted into 
the small neighborhood, killing two people, injuring dozens and destroying eleven 
homes. The company immediately began damage control and set out to correct the 
problem. 

According to Gottschalk, two hundred families that lived in the area affected by 
the train derailment and gas leak were housed and fed at unaffected areas (1993). 
The company held a public meeting five days after the leak for residents in order to 
explain what had happened and outline their strategy to ensure the safety of the 
pipeline in the future. Kinder Morgan and Southern Pacific cooperated with 
investigations regarding the derailment and leak, as well as worked together to 
provide the community with any needs. The first step they took was to place a 
statement in the San Bernardino Sun showing their concern for the safety and health 
of the residents of the area. The second step they took was sending letters out to 
customers, employees, parent companies, and shareholders in order to explain what 
had happened and the plan of action for the future. Both companies also established 
relationships with the legislators of California and Nevada, as well as city officials in 
the area, in order to show they were sincere and committed to rebuilding the 
community. 

Kinder Morgan decided to reopen the pipeline only when it was deemed safe 
and secure; however, the pipeline was a vital part of the regional economic 
infrastructure as well as part of national security. The pipeline is also one of the 



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safest methods of transporting the dangerous fuels and petroleum products across 

the vast number of miles. When the decision to reopen the pipeline on June 9 was 

presented to the public, seventy-two percent of people were in support of the plan. 

However, the company took major steps in ensuring the safety of the new pipeline. 

Some actions they took were replacing six hundred feet of pipeline in the area, 

burying it sixteen feet deep underground, and encasing all pipes in concrete slurry. 

The image restoration strategy used by Kinder Morgan and Southern Pacific 
after the train derailment and pipeline rupture was corrective action. Both companies 
established effective communication with the public, community, and officials in order 
to ensure a fast response and sincere apology. Kinder Morgan was able to retain one 
hundred percent of its customer base, and the price of its stock was in no way 
affected by the crisis. They were also successful in containing the amount of media 
present for the crisis, and limited the interest to only the regional level within one 
week of the accident. By using corrective action and attempting to resolve the 
problem rather than avoid it, both companies were able to remain successful and 
uphold their outstanding reputations. Even though the crisis had the potential to be 
extremely damaging, the long-term business objectives of both companies were 
unaffected. 

Kinder Morgan's actions after the train derailment and pipeline rupture were 
successful in proving their dedication to public safety. Corrective action and 
bolstering are successful image restoration strategies and demonstrate the correct 
ethical decisions of a company. The Calnev pipeline rupture could have been 
extremely damaging to the future of Kinder Morgan; however, I believe the actions 



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they took after the crisis were successful in upholding their reputation. These actions 

will continue to further the success of the company and will eliminate the crisis from 

public opinion. 

Summary of Findings 

The previous eight cases provide an insight into what occurs when a crisis 
takes place, as well as the reaction by eight prominent organizations. By evading 
responsibility, Ford and Exxon both risked the future success of their company. 
Johnson & Johnson, Gerber, Union Carbide, McDonald's and Kinder Morgan were all 
able to maintain the successful reputations of their companies by taking corrective 
action and reducing the negative impact of their crisis. Even though AT&T did not 
use corrective action, their ability to reduce the offensiveness of the crisis allowed 
them to remain successful and maintain their superior reputation. The following table 
shows each case and the image restoration strategies used by each company when 
faced with a crisis, as well as the researcher of each strategy. This table helps show 
which image restoration strategies were used by each company during their crisis. It 
also describes which strategies were researched by either Benoit or Ware and 
Linkugel. 



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Firm's Image Restoration Strategies: 
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Image Restoration Strategies Table 



Cases \Researcher 


Benoit 


Ware and 
Linkugel 


Ford Motor Company: The 
Pinto Case 


Evading Responsibility/ 
Denial 


Denial/ 
Differentiation 


The Exxon Valdez Oil Spill 


Evading Responsibility 


Differentiation/ 
Transcendence 


Murder at McDonald's 


Corrective Action/ 
Mortification 


Bolstering/ 
Transcendence 


AT&T Network Breakdown 


Reducing the 

Offensiveness/ 

Mortification 


Differentiation/ 
Transcendence 


Gerber: Baby Food Glass 
Contamination 


Corrective Action 


Bolstering 


Union Carbide Gas Leak 


Corrective Action 


Bolstering 


The Tylenol Poisonings 


Corrective Action 


Bolstering 


Calnev Pipeline Rupture 


Corrective Action 


Bolstering 



Conclusion 

Ethics is essential to the success of corporations due to their social 
responsibility to the public. The previous cases have demonstrated how some 
companies, such as Tylenol, AT&T, and Gerber, make positive decisions and can 
escape a crisis without losing their market share or reputation. However, some 
companies, such as Ford and Exxon, are unsuccessful in implementing their image 
restoration strategies which results in the need to rebuild the trust of consumers. A 
crisis can be devastating to the success and future of an organization. If a company 
does not attempt to restore their image after being faced with a crisis, the reputation 
of their company may be damaged for the remainder of their existence. These steps 
and strategies offer organizations a way to deal with a crisis and remain honorable in 
the opinion of the public. Companies must attempt to show that they care about the 



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safety of their consumers and are concerned with the overall quality. If a company 
does not accept responsibility for a problem, consumers may refuse to continue 
doing business with them due to their lack of remorse. An organization must also be 
prepared in the even of a crisis so they will not suffer more than necessary. Overall, 
the research of Ware, Linkugel, Benoit, and Gottschalk provide steps for dealing with 
a crisis while these cases provide real-life examples. 



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References 

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Benoit, W. (1995). Accounts, excuses, and apologies: A theory of image restoration 
strategies. Albany, NY: State University of New York Press. 

Birsch, D. (1994). The ford pinto case: A study in applied ethics, business and 
technology. Albany, NY: State University of New York Press. 

Clinard, M. (2006). Corporate crime. New Brunswick, New Jersey: Transaction 
Publishers. 

Cullen, F. (2006). Corporate crime under Attack: The ford pinto case and beyond. 
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Friedman, M. (1970, September 13). The Social responsibility. The New York Times. 

Gottschalk, J. (1993). Crisis response: Inside stories on management under siege. 
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Hearit, K. M. (2005). Crisis management by apology: Corporate responses to 
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Petit, T. (1967). The moral crisis in management. New York, NY: McGraw-Hill. 

Pinsdorf, M. (1987). Communicating when your company is under siege: Surviving 
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Trevino, L. (2006). Behavioral ethics in organizations: A review. Journal of 
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Ware, B & Linkugel, W. (1973). They spoke in defense of themselves: On the generic 
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Wells, P. (1995). Exxon Valdez oil spill: Fate and effects in Alaskan waters. 
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Union carbide history. (1995). Retrieved from 
http://www.unioncarbide.com/history/index.htm on July 26, 2009. 



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Firm's Image Restoration Strategies: 
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Johnson & Johnson history. (1997). Retrieved from 
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Tylenol customer care center: Our Mission. (1998). Retrieved from 
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ExxonMobil-Our history. (2003). Retrieved from 

http://www.exxonmobil.com/corporate/history/about who history. aspx on March 5, 
2009. 

McDonald's history-About McDonald's. (2009). Retrieved from 
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AT&T corporate history. (2009). Retrieved from http://www.att.com/qen/investor- 
relations?pid=571 1 on May 12, 2009. 

About our story-Gerber. (2009). Retrieved from 
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Ford motor company heritage. (2009). Retrieved from http://www.ford.com/about- 
ford/heritaqe on March 5, 2009. 

Kinder Morgan company history. (2009). Retrieved from 
http://www.kindermorqan.com/about us/kmi history.cfm on July 26, 2009. 

America's most admired companies. Fortune (2007, March 19J Retrieved from 
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